Opinion: Why the Republicans’ Obamacare replacement is bad for business

Health-care and medical-device companies have done well under the Affordable Care Act

Bloomberg

Rep. Jason Chaffetz is trying to sell the new Republican health-care plan to Americans.

By

Tim Mullaney

There’s so much wrong with Republicans’ newly revealed bill to repeal and kinda-sorta replace the Affordable Care Act that it’s nearly impossible to be the first to point out everything wrong with it.

As with medicine itself, it’s important to specialize. So I’ll harp on this: The bill is terrible for many businesses, in health care and otherwise, and fixes problems for others that simply never existed.

First, the basics. The GOP’s bill, as expected, begins the task of replacing the health insurance more than 20 million Americans rely upon by repealing taxes that pay for it, nearly all paid by families with incomes over $250,000 and by corporations. (Which has been the point of this exercise all along.) It phases out Obamacare’s expansion of Medicaid eligibility into the working class, stranding 15 million folks who mostly work for companies that don’t offer affordable insurance.

Predictably, moderates and liberals think the bill is too chary toward poor and middle-class people — including four Senate Republicans whose opposition to its Medicaid-expansion phaseout means it won’t pass the Senate without major changes. Just as predictably, there are those on the right who think the bill is too generous. Representing the right is Utah Rep. Jason Chaffetz, a Republican who explained that some people will sacrifice their Apple
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iPhones to afford family health coverage at $1,500 a month. Because one thing’s exactly like the other.

Finally, the bill is believed to be likely to accelerate depletion of Medicare’s trust fund, giving House Speaker Paul Ryan an argument for his long-held goal of converting Medicare to a limited voucher. That’ll please Florida voters about as much as it did in 2012, when the senior citizen-heavy state rejected then-GOP vice-presidential nominee Ryan and his running mate, Mitt Romney.

But let’s review facts about ACA’s economics that might get overlooked.

First, no matter how often Ryan calls ACA a job-killer, it ain’t. The current streak of 84 months of positive job creation, by far the record, began in February 2010, the month President Barack Obama signed the ACA. Private employers who were supposed to be scared into submission have created 16 million jobs since, including nearly 6 million at small businesses supposedly frozen into not investing by the prospect of skyrocketing medical costs.

Second, the tax on medical-device companies simply didn’t hurt them.

Device companies like Medtronic
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began caterwauling even before the ACA was approved — a 2.3% excise tax on medical devices helped pay for the plan. Their point was that everybody got something in exchange for supporting the law but them: Hospitals got fewer uninsured patients and more volume, insurers got new customers with subsidized premiums and so on. Device makers, on the other hand, thought they wouldn’t be able to pass the tax along and would have to eat it, in the form of narrower profit margins and languishing stocks.

Aetna
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could hardly have made it clearer last August: The estimated $1.5 billion to $2 billion insurers lost on ACA-compliant insurance last year came from easily corrected problems. In particular, insurers had been caught unprepared for a spike in prescription-drug costs, led by new remedies for hepatitis C that cost nearly $100,000 per patient. “People seeking care through these … products need this care,” Aetna CEO Mark Bertolini said. “[They] aren’t running off to get services that they don’t need.”

Insurers had a simple answer for that: Rule changes that cut drug costs, plus mergers that let them make up unexpectedly high medical expenses on some ACA patients by cutting administrative costs. The Obama administration, to its discredit, blocked two big, sensible health-insurance mergers. That’s no reason to kick 20 million people off insurance rolls.

Fourth, no matter what Congress says, ACA has been great for health-care companies and health-care stocks.

The device makers — we’ve already covered. Hospital chains like HCA
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and Tenet
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described the ACA as integral to their profit gains in 2015: HCA’s stock is up 240%, and the S&P 500 Health Care Index has more than doubled over the past five years, handily beating the broader market. Four of the Big Five insurance companies have seen their shares triple since 2012, and the laggard, Aetna, more than doubled.

As the venture capitalist Ann Lamont and former Obama aide Ezekiel Emanuel point out, business writ broadly has saved a ton of money under the ACA, because it dramatically slowed increases in health-care costs. The self-appointed party of business would toss that aside to merely redistribute after-tax income and wealth upward, yet again.

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